All The Word’s Economy Is Candy And How To Get A Taste
When I was in 7th grade, my Home-Ec. Teacher, Mrs. Reed, gave a bag of candy to each kid and asked us to put a value on it. The total value was summed up and the number was written on the board. Then she asked us to buy and sell candy with each other for imaginary money.
After a day of trading, we were asked to sum up our imaginary money plus leftover candy. The resulting number was much higher than the original total value.
My classmates and I took to trading lesser-valued candy and trying to extract maximum moneys out of it. But there was something else at play.
We could say that the process of trading itself was the root-cause of the ballooned-up GCP (Gross Classroom Product)
I was reminded of this while reading a fascinating book on how we price things. The Price of Everything (Amazon Affiliate Link) is available now.
Stock Markets are exactly the same as Mrs. Reed’s 7th grade experiment with pre-pubescent intellectual midgets. And Stock Brokers, Hedge Fund Managers and CxOs are just as easily swayed by the forces of the trading system as I was in 7th grade. Except.
Except, Stock Brokers, Hedge Fund Managers and CxOs are strategically positioned to extract commission from each transaction.
Hence the creation of derivatives markets (subprime), parallel markets inaccessible to us mortals (cap and trade), stocks, mutual funds, and on and on and on…
Every time a transaction is made, the true value of anything will be altered. Even if it’s a fair deal for buying/selling parties, the process of transacting using intermediaries requires that these intermediaries be compensated thereby ballooning-up the value of analogized candy.
Multiply the transacting cost by about a billion times per year (number of stock and other transactions) and you end up with a gross amount that is just as imaginary as the money we used in 7th grade.
However, the system that extracts money from transactions is not going to cut-off it’s own legs.
It will continue to encourage transactions (how many times per day do you get a call to refinance your mortgage?) with all the players blissfully ignorant of the fact that they are the cause of the imaginary world economy that we have today.
Did you know that there are more mutual fund plans than there are actual mutual funds?
The system whose life-blood is transactions will continue to demand that we engage in transactions in order for the system to support itself; however, this system doesn’t contribute in any way to the overall production of candy.
Do you remember when the American industrial system used to produce…ahhh products? Products are tangible, but if there is no tangible product to sell then WHAT are we selling?
The answer? We are selling transactions. Ipso motherfuckin’ facto, no real product, no real economy.
The observant among you will notice that I’m sidestepping the issue of service economy but let’s skin that cat another day.
So what IS the solution?
I hope Ron Paul, now that he actually has the governmental power to do it, will be true to the title of his book and End the Fed (Amazon Affiliate Link)
While we’re at it, let’s dispose of Stock Exchange. Banks. The World Bank (most evil of all evil corporations). Transacting firms (like Goldman Sacks). Insurance giants (Tax payers should have rioted when US gov bailed out AIG) and similar corporate malarkey.
That would be a solid start.